The UK’s economic recovery loses some traction as retail sales disappoint in June

24th July 2014

The hot weather is keeping shoppers off the High Street and potentially endangering the UK’s economic rebound as official numbers show a paltry rise in retail sales in June.

Sales were up just 0.1% month-on-month and 3.6% year-on-year in June but economists had expected increases of 0.3% and 3.9% respectively.

Commenting on the statistics, Ben Brettell, senior economist at financial adviser Hargreaves Lansdown said: “Today’s retail sales figures disappointed economists, who were seeking evidence that the consumer-led recovery continues apace. Retailers continue to battle against the headwind of virtually non-existent wage growth at 0.3% including bonuses, 0.7% excluding, at the last count.”

However Junes marginal rise follows a dip of 0.5% in May. In addition retail sales volumes increased 1.6% quarter-on-quarter in the in the three months to the end of June, which bodes well for overall consumer spending and GDP growth.

Howard Archer, chief UK and European economist at IHS Global Insight noted this was the strongest quarter-on-quarter growth in retail sales volumes for 10 years.

He said: “Furthermore, it appears that consumer demand for services was healthy in the second quarter.

“It may well be that consumers took a bit of a breather in June itself ahead of their summer holidays after splashing out at a rapid rate earlier on this year. Significantly, survey evidence from the CBI indicates that retail sales rebounded markedly in July, seemingly helped by the warmer weather.”

But Archer cautioned that it is questionable how strong consumer spending can be on a sustained basis until earnings growth picks up appreciably.

Brettell added: “All eyes now turn to tomorrow’s GDP release – the consensus forecast is 0.8% growth in the second quarter, which would mean that UK economic output had finally surpassed its pre-crisis peak.”